Making Sense of the Human Capital Industry

The human capital marketplace remains highly competitive and is poised for enormous growth in the next 10 years. Companies around the world are again investing in their human resources infrastructure, including new products and services, and of course, their people. The size of the human capital marketplace has been estimated to be in excess of $200 billion (Baird, 2002) and encompasses tens of thousands of vendors.

What is the human capital marketplace? In general, the human resources function of an organization is responsible for all the practices and processes that impact the company’s most important asset – their employees.

And while admittedly there are many ways of categorizing the human resources industry, we believe the simplest and most logical method is to organize the industry within the following pillars:

1. Recruitment and Staffing: This includes searching for and hiring new employees and a wide variety of services from job boards to staffing and relocation firms, testing and assessment technologies, applicant tacking technologies, executive search/placement firms, background checking services, etc. For the most part, this category ends when the employee is hired.

2. Compensation/Payroll: This includes everything from payroll processing companies to companies specializing in specific payroll and compensation services, compensation design, and salary statistics services.

3. Employee Benefits: This category encompasses a wide variety of employee benefit and related services from traditional health and welfare benefits to worksite/voluntary products, pharmacy benefit programs, benefits administration and communication software, third-party administrators, retirement plan services, and workers compensation/disability insurance services.

4. Talent Management/Employee Relations: This category includes all the human resources services related to managing the individual once they are hired as an employee -- appraisal, evaluation, recognition, promotion, retention, and succession planning services.

5. Training and Development: This category includes the many products and services related to training and developing employees from instructor-based training to eLearning solutions.

6. Compliance: This category includes all the services related to complying with and managing the various aspects of labor laws, labor relations, legislation, litigation, alternative dispute services, OSHA, HIPPA, etc.

In addition to these specific human resources categories, it is also important to highlight services that are cross-functional in nature and relate to one or all the HR pillars:

7. Consulting Services: This cross-functional category includes the thousands of consulting firms that can help HR departments with one or all aspects of human resources management and process improvement.

8. HRIS/ERP/ATS Solutions: At one time, this might have been considered a separate pillar within HR. However, we believe that technology is integrated with and impacts all aspects of HR. For example, HR technology is now being used to address individual solutions within a pillar (i.e., applicant tracking systems) along with addressing the entire spectrum of HR (i.e., enterprise management solutions).

The Internet and other technologies are fundamentally changing the human capital marketplace as companies strive to become more efficient. Technology allows HR to automate processes and eliminate many of the more labor-intensive transactional and administrative processes that have burdened HR professionals for years.

9. Outsourcing: Any and all aspect of HR can be outsourced. According to research by Gartner, Inc., 80 percent of companies now outsource at least one HR activity, and the number is swiftly growing. For this reason, we do not consider outsourcing as a functional pillar within HR, but rather cross-functional. Increasing numbers of organizations are turning to specialized firms to supplement various aspects of human resource management. While outsourcing makes sense for many reasons, the primary benefit is containment/reduction of costs of routine transactional and administrative work. Another key reason is the belief that a company should outsource all non-mission critical aspects of its business.

We would love to hear how you think the human capital industry should be categorized. Send us an email! Our email link is on left sidebar.